Stamp duty on the purchase of houses delivered a $7.77 billion tax bonanza to State and Territory Governments in the past year, while next to no stamp duty relief was provided to first home buyers.
While governments continue to cry poor, there is an emerging new class of poor–first home buyers, particularly in the major capital cities. It’s a big enough struggle for first home buyers to scrape together a five% deposit for a house and land package, let alone another five% to pay for stamp duty.
The failure to index stamp duty rates against increases in house prices has delivered windfall tax gains through stamp duty bracket creep. The average house increased in price by 28% Australia over the past two years, while the effective rate of stamp duty payable on the average house increased by 45% over the same period.
The house price limits applying to stamp duty rebates for first home buyers are completely out of touch with prevailing house prices.
In Melbourne, the average first home buyer would not have been able to claim any stamp duty rebate had they bought at any time in the past three years.
The first home buyer stamp duty rebate should be made effective by increasing the house price limits at which the rebate is available.
The impact of stamp duty on new housing is particularly onerous. The price of a new house and land package can include stamp duty paid on the purchase of raw land, stamp duty when the land is bought by a builder and more stamp duty on the purchase price of the house and land package including the GST.
The cascading of stamp duty on the purchase of land through the different phases of development discriminates against builders purchasing land for construction and cannot be justified other than as a blatant revenue gathering device.
Multiple purchases either of land parcels by developers or blocks of land by builders can create a significant additional stamp duty burden through aggregation of the purchase price of individual sites, pushing the total value of purchases into higher stamp duty brackets.
A builder acquiring ten blocks of land in Sydney for detached housing would have to pay an extra $6,000 in stamp duty on each block based on current land prices. Not only does aggregation increase the amount of stamp duty payable on individual blocks, it creates a disincentive for developers and builders to consolidate land holdings to provide more integrated forms of housing design and accommodation.
Stamp duty on the purchase of a home should be paid once only—at the final point of sale to the home buyer. To remove the cost of double and triple dipping of stamp duty on new housing, state governments should allow developers and builders to claim a stamp duty exemption on land purchases, where the land forms part of their trading stock, in exactly the same way motor vehicle dealers are able to claim a stamp duty exemption on motor vehicles acquired for sale.
The exemption of stamp duty on land purchased for trading stock would not only avoid the cascading of stamp duty on new housing, it would overcome the problem of aggregation. The reform of stamp duty taxation would help to reduce the price of a typical new house by about 4%.
State governments have special provisions to avoid the double dipping of stamp duty on the purchase of the family car. Why not extend the same rules to the purchase of the family home?
*Ron Silberberg is managing director of the Housing Industry Association.
